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Due to the lockdown caused by the Covid-19 pandemic, many companies are currently closed or open at reduced hours and have applied for a redundancy fund (Kurzarbeit). The redundancy fund is only granted if the loss of employment would otherwise be unavoidable and if the employer can prove that he has done everything possible to avoid the dismissal of his employees, e.g. by first reducing the time credits or overtime of employees.

During this period many workers are taking paid holidays, either because of the reduced workload due to the Lockdown, or to take care of their children as schools have been closed for a long time. In general, holidays can also be taken during the lockdown period and will be paid by the employer at the usual rate of pay.


What impact does the redundancy fund have on holidays?

Kurzarbeit has an impact on employees’ holiday entitlement. With regard to holiday entitlement for the duration of short-time work, the following applies: holiday entitlement can be reduced over time according to working hours. Thus, if you work less or not at all, your holiday entitlement is also reduced accordingly in terms of time, since part-time workers are to be equated with ‘temporarily part-time workers’ due to a ruling by the European Court of Justice.

According to Federal Employment Agency, from this year on, holidays will have to be used as a means of avoiding recourse to the redundancy fund.

If there is already a holiday plan for 2021 (e.g. a list of public holidays or a company holiday plan, etc.), then holidays should be taken according to the dates already established. If the holiday plan is changed only because of the redundancy fund, it means that there is no unavoidable interruption of the company’s production cycle.

If the company does not have a holiday plan, the 2021 annual leave entitlement of all employees must be asserted no later than the end of the year in order to avoid the redundancy fund. If these holidays are not taken, it means that there is an unavoidable interruption of the company’s production cycle.

At the beginning of the year (and therefore of a new holiday reference year), employers do not have to submit their holiday plans to the Federal Employment Agency straight away. A provisional holiday plan, a holiday list or a company holiday agreement will be enough in the beginning. The owner of a company will send the holiday plan as soon as he asks his employees to organize their vacation time.


Using the previous year’s residual leave?

As a general rule, employees must use their remaining leave from the previous year in priority before receiving the lay-off, and this applies to leave from 2021 onwards. (The only exception is if the employee’s wish to use the remaining leave in another way takes priority; these wishes generally take precedence).

The Federal Employment Agency decided not to use the remaining holiday leave from the year 2020 in order to avoid Kurzarbeit. This is because 2020 was a tough and peculiar year with the Pandemic taking everyone by surprise, and workers are therefore allowed to use any remaining leave from 2020 to take care of themselves and their families.